Washington DC just got done with a silly drama organized around cutting $1.2 trillion from the Federal budget. Republicans and Democrats argued about whether to “go big” or “go bigger,” with numbers thrown around in the trillions. Ultimately the Supercommittee collapsed of its own weight. This is a perverted way to think about policy-making. The question, as I make clear in my upcoming book Greedy Bastards, should never start with how much, but how. We must think about goals first, and then about the resources necessary to get there.
Let’s take a health care example. Imagine if you could identify a small number of patients who end up eating up most health care dollars. Let’s say you could focus resources just on them, improve their health outcomes, while also cutting the overall amount of health care spending dramatically. This wouldn’t be a question of how much, but how. This isn’t fiction, it comes from Camden, New Jersey, one of the poorest cities in the country. And the technique is known as hot-spotting, or targeting resources to needs.
A remarkable physician, Dr. Jeffrey Brenner, figured out that the sickest patients in Camden were returning repeatedly to the emergency room, costing the health care system enormous sums of money. Because they were always seeing specialists or coming to the ER, they had no real advocate overseeing their health. The health care system was fragmented and passive, and so it failed to deliver care where it was needed even though it cost huge sums of money. Brenner told me of one diabetic who kept getting sick. Brenner sent a community outreach team to this guy’s home to see what was going on. As they watched the man going through his routine, the team realized he was sight impaired. So he would put a syringe into his bottle of insulin to draw medicine, but instead it would draw in 50 cc’s of air. That’s why he kept getting sick, there was no complicated medical issue here, he didn’t need to see another expensive specialist. The guy just needed glasses! This process, of sending a team to a very sick patient’s home to see what was going on, saved money for all of us and improved health outcomes.
This is hot-spotting: a problem solving technique that targets the most expensive problems or in-need people by allocating resources to specific problem areas as revealed by data.
Another way to think about hot-spotting is as the “eighty twenty” rule. This is a rule of thumb that says that eighty percent of the output of any system comes from twenty percent of the input. So for instance, twenty percent of the people do eighty percent of the work, or twenty percent of the kids in a school cause eighty percent of the problems. And it is operative across most of our cultural problems and opportunities.
I interviewed David Banks, the President of the Eagle Academy for Young Men in New York City. He is pursuing an innovative set of academic programs to target the young men most likely to be incarcerated, and putting them in a deep and rich educational and mentorship experience. Banks told me that over 70% of the inmates for the entire New York state correctional system come from very specific neighborhoods in New York City. And that in many cases you could identify specific buildings where the problems come from. If you target educational and social resources to those specific areas, you can knock out a huge amount of crime and societal problems. It’s hot-spotting.
William Bratton, who I’m having on my show today, helped use these techniques to improve policing in New York City using a database called CompStat to track crime. This tool allowed the police force to target resources where crimes were occurring, as opposed to patrolling the entire city with an equal amount of policing. It helped the police force become proactive. Now in use nationally, the CompStat database is often credited with a profound national dip in violent crimes.
What I take from these examples is that how, not how much, is what matters. Public policy-making, or really any cultural organizing, is about allocating resources to solve problems. Sure, you need to figure out how much to spend, but just randomly basing what you spend based on what you have makes no more sense than deciding that you are going to cook meals with 11 eggs because that’s what you have in the fridge. The important part is to figure out what you are cooking and then allocate resources strategically to make the best meal possible. How you cook, or solve a social problem, how you measure and manage, matters. It makes a lot more sense to send an inexpensive community outreach specialist to visit a diabetic patient in his home every so often than take up the time of a highly trained physician in an emergency room to treat the symptoms of someone going into a coma. But that’s a question of how, not how much.
One of the themes of my coming book is hot-spotting. It’s a technique the Greedy Bastards don’t always like, because it can be much more profitable to throw resources away than to make sure they are used wisely. Hospitals like getting paid for admissions, they prefer that revenue stream to sending someone to check that a diabetic can actually see his insulin medicine. Too often, they want to talk only about how much revenue they get, not how they can deliver care. This is true of the educational establishment, the financial establishment, the energy establishment, etc. They want to know how much, not how. They want to figure out how much coal or oil to burn, not how to increase our energy efficiency and change social habits to consume energy more equitably. They want to know how much money they will get from the next bailout, or how much lending they will need to do, not how to flow capital so that it gets to the best opportunities to create real wealth.
But we must focus on how if we want an equitable society. Such a society is one in which a health care system serves the interests of the patient and the nation – for effective care at a reasonable price – not the interests of an irrational payment system and the institutions it feeds. We must allocate resources where they are needed, not where they are not.
So stay tuned. I’m going to be hitting this theme for some time to come.
Here are our two first episodes of Greedy Bastards Antidote, featuring Dr. Jeffrey Brenner and David Banks.